India’s largest private engineering and construction company, Larsen & Toubro (L&T), reported a 4.7% rise in profits for the quarter ended on March 31 on the back of steady order inflows from infrastructure, hydrocarbon and IT and tech services segments.
The profit for the quarter grew to Rs 3,167 crore from Rs 3,025 crore a year ago, while revenue rose 10.5% to Rs 40,678 crore from Rs 36,828 crore.
The company said a large chunk of its order inflows were from the infrastructure space, contributing around 57% of total order inflows; hydrocarbon projects contributed around 10%. The gross revenue from these segments saw a significant uptick on a year-on-year basis for the March quarter. Gross revenue for the infrastructure segment grew nearly 14% to Rs 23,136 crore, and that of the hydrocarbons segment grew nearly 38%, touching Rs 3,559 crore. Another segment that saw a significant jump in gross revenue was IT and tech services, which recorded a 24% growth.
However, gross revenue from the power segment, which has been under the stress of large debts for a while now, fell 18% year-on-year to Rs 1,507 crore.
Speaking to the media after the results were announced, R. Shankar Raman, whole-time director and CFO of L&T, said that it was very important that big orders from the power segment start coming in again to aid the company’s revenue growth going ahead.
Despite the headwinds in the power segment, the company was confident that growth in revenue and margins would continue. For the current financial year, L&T said it expected a 12-15% rise in revenue and a 10-12% increase in order inflows. “Margins currently stand at 10.5%, we think they will remain stable with an upward bias of 25 basis points,” Raman said. He added that the rise in margins would come from productivity gains and cost optimisations. “There are several pockets where costs can be fine tuned further,” he said.
L&T said in a statement that fresh orders won at a group level for financial year 2017-18 were to the tune of Rs 1.53 lakh crore, a growth of 7% over the previous year. However, the management said that it continued to be heavily dependent on the government and public sector for large orders, adding that big orders from the private sector will still take another two years to start flowing in.
On the debt front, Raman said that the standalone debt of the company was at a healthy Rs 10,000 crore, which could be less than the amount of just one big ticket order. Raman also added that on the overall group level, there was a net addition of about 6,000 people to the workforce during the previous financial year.
As Mizoram, Chhattisgarh, Madhya Pradesh and Rajasthan go to the polls by the year end before the general election due by May 2019, L&T’s MD and CEO S.N. Subrahmanyan said he was “cautiously optimistic about the government’s push to infrastructure and developmental projects going forward”. He also added that the company will focus on its core business of engineering, procurement and construction projects instead of toll-operate-transfer and hybrid-annuity-model projects.
